La Celeste hit Gerardo Martino's side with a first half double salvo, courtesy of strikers Luis Suarez and Diego Forlan. The Atletico Madrid man completed his brace moments before the final whistle to ensure Uruguay's triumph for a record 15th time, one ahead now of their bitter rivals Argentina.
Oscar Tabarez' men made their intentions known right from the start as shortly after the opening whistle, Suarez nearly forced a goal with a shot from inside the six-yard box, but the ball hit the side-netting.
Justice was served in the 11th minute when Suarez made his way down the right flank and unleashed a stinging shot, which deflected off Dario Veron before trickling into the left corner and past the goal line.
The game became scrappy as emotions were getting the better of the players. In the space of 18 minutes, the referee showed no less than four yellow cards in an effort to prevent further offence from both teams.
Uruguay had a wonderful chance to double their lead near the half-hour mark when Suarez released Forlan with an excellent through-ball, but the Atletico striker was denied by Justo Villar in a one-on-one.
Minutes before half-time, Uruguay did make it 2-0. Egidio Arevalo stole the ball in midfield, and found the unmarked Forlan, who made no mistake this time as he powered a scintillating finish in the right corner to double la Celeste's lead.
Paraguay tried to claw a goal back after the restart, but were struggling to bypass Uruguay's resilient defence and midfield.
Gerardo Martino's men were leaving plenty of open spaces, and la Celeste nearly capitalise in the 55th minute when Suarez threaded a pass for Forlan near the penalty spot, but Veron made a vital interception and deflected the shot.
Just before the hour mark, Paraguay went close to scoring when Nelson Valdez's powerful drive from outside the box was tipped onto the bar by the flying Nestor Muslera.
The Hercules striker had another chance moments later when Cristian Riveros found him with a very good ball from the right wing, but the striker failed to convert from close range.
Substitute Edinson Cavani forced a wonder save from Villar with 11 minutes to go as Oscar Tabarez' men were growing increasingly dangerous on the counter. And they put the icing on the cake through a fast break as Forlan completed his brace with a superb finish in injury time, following a cushioned header from Suarez.
The victory gives Uruguay their 15th Copa America title to become the most successful team in the tournament.